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South Korea's Democratic Party Considers Ending Crypto Exchange Banking Rules

Coin WorldTuesday, May 13, 2025 7:45 pm ET

1min read

South Korea's political landscape is abuzz with discussions around potential deregulation of crypto exchanges, a move that could significantly impact the nation's banking sector. The Democratic Party, the largest party in the National Assembly, is reportedly considering a manifesto promise to eliminate existing fiat on/off banking rules. These rules currently mandate that domestic fiat-trading crypto exchanges partner with a single bank to provide customer banking services through dedicated crypto wallet-linked bank accounts.

This potential shift in policy comes as the ruling People Power Party (PPP) has already unveiled a series of crypto-friendly promises, including the elimination of the aforementioned banking rule. If the Democratic Party follows suit, it could mark the end of exclusive banking deals for crypto exchanges, allowing them to partner with multiple banks. This change could pose challenges for K Bank, which has seen substantial growth due to its partnership with the leading exchange, Upbit. Upbit accounts for nearly 68% of the total domestic market, making K Bank's dependence on this partnership a critical factor in its business strategy.

The banking sector is bracing for significant changes as voices advocating for deregulation grow louder ahead of the upcoming presidential election. The campaign team of the Democratic Party's candidate and frontrunner, Lee Jae-myung, is reportedly strongly considering a similar pledge. This move could directly impact K Bank, which has been Upbit's exclusive banking partner since mid-2020. Critics have previously expressed concerns that K Bank's reliance on its Upbit-related business could hinder its long-running bid to go public.

South Korea is scheduled to hold its presidential election on June 3, following the impeachment of President Yoon Suk-yeol earlier this year. Lee Jae-myung leads in most polls by a margin of about 20%. In response to the PPP's efforts to attract younger voters with crypto-friendly policies, the Democratic Party has launched its own Digital Asset Committee, headed by pro-industry lawmaker Min Byoung-dug. Min has previously advocated for tax parity between stock traders and crypto investors and has urged Seoul to approve Bitcoin spot ETFs.

Regulators are also showing signs of softening their stance on the crypto sector. The Financial Services Commission (FSC) is reportedly exploring conditional deregulation measures. FSC Chairman Kim Byung-hwan stated that the existing banking rules were introduced to mitigate money laundering risks and that a comprehensive review will be conducted to assess whether banks and exchanges have the necessary systems in place to manage related risks. An unnamed financial industry executive noted that the growing calls for deregulation will likely influence policy changes, but emphasized the need for a gradual approach to ensure any shortcomings are addressed.

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